CC SR 20201201 G - Business License Tax Rate for 2021
CITY COUNCIL MEETING DATE: 12/01/2020
AGENDA REPORT AGENDA HEADING: Consent Calendar
AGENDA TITLE:
Consideration and possible action regarding the 2021 Business License Tax.
RECOMMENDED COUNCIL ACTION:
(1) Direct Staff not to increase the City’s Business License Tax Rate for 2021;
(2) Direct Staff to continue reducing the annual Business License Tax for Home
Occupancy businesses to zero ($0) for 2021; and
(3) Direct Staff to sunset the 2020 Small Business Financial Assistance for the
one-time refund of the business license tax.
FISCAL IMPACT: If the recommended action is approved, there will be no change to
the adopted budget.
Amount Budgeted: $865,300
Additional Appropriation: N/A
Account Number(s): 101-300-0000-3210
ORIGINATED BY: Christopher Browning, Senior Administrative Analyst
REVIEWED BY: Trang Nguyen, Director of Finance
APPROVED BY: Ara Mihranian, AICP, City Manager
BACKGROUND:
The Finance Department presents this staff report annually following the approval
of the January 17, 2017 business license staff report. In this report, the City Council
requested that staff present the automatic increase of the business license tax
(BLT) based on the Consumer Price Index (CPI) for evaluation. At that meeting,
Staff provided analysis showing that the annual CPI increase provided only minimal
increases to the revenue and recommended that the City Council direct Staff to
bring the BLT increase option back to the City Council annually for direction.
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DISCUSSION:
Business License Tax Rate for 2021
As required by Section 5.04.050 of the City’s Municipal Code, all business activity
performed within the City of Rancho Palos Verdes requires the business owner to
obtain a business license and to pay the related BLT. The primary features of the
business license tax are as follows:
1) A minimum tax based on the location a business operates (i.e., located
inside/outside the City and/or physical presence within the City) and the type of
work or service performed.
2) The BLT is based on a flat rate tied to a business’s gross receipts. In addition to
the minimum tax, for every $1,000 in gross receipts in excess of $50,000. This
rate applies to businesses physically located inside or outside the City.
Contractors, itinerant vendors, builders, developers, and operators of commercial
vehicles (i.e., taxis) are exempt.
The City has a total of sixteen different types of BLT. As of November 20, the City
issued 1,887 licenses for a total amount of $826,900 or 95% to FY 2020 -21 budget. As
illustrated in Chart 1, of the total amount, $472,600 or 57% of the BLT comes from in -
City businesses, $207,000 or 25% from general contractors and sub -contractors,
$77,000 or 9% from businesses outside the City, $43,400 or 5% from residential rentals,
and $26,900 or 3% from delivery vehicles and refuse haulers.
Chart 1 Business License Tax Year to Date Revenues
Based on the BLT CPI rate in September of 1.2%, the estimated potential revenue loss
is approximately $10,400 if the rare were to remain unchanged. Due to the minimal
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revenue loss and to help support businesses during the current economic downturn,
Staff recommends that the 2021 BLT remain unchanged from the 2020 rate.
Business License Tax for Home Occupancy for 2021
On June 4, 2019, the City Council voted and approved reducing the annual BLT for
Home Occupancy businesses to zero, effective September 6, 2019. The tax reduction
was made as part of City Council’s continued efforts to decrease taxes and fees for the
residents of Rancho Palos Verdes. Based on the most current information in 2020, the
City assisted over 430 home businesses, totaling $49,000.
Staff is recommends to continue to support over 430 of home businesses and suspend
the BLT for 2021.
2020 Small Business Financial Assistance
In response to the economic impacts to local business resulting from the L.A. County
Health Department’s stay at home orders, earlier this year, the City Council amended
the Small Business Financial Assistance to provide relief for the City’s small busines s
community experiencing negative financial impacts. The assistance was a one-time
refund of the 2020 BLT for the small businesses within the City that generated less than
$1.5 million in gross receipts in 2019. To date, this program issued 14 refunds totaling
to $4,939, with the last request received in September.
Since the Small Business Financial Assistance program is based on the BLT paid in
2020, Staff recommends to officially sunset the program at the end of December. The
City’s adopted revenue of $865,300 for business license tax does not account for any
increases; therefore, the recommendation would not have a fiscal impact for FY 20-21.
The City Council can select to reinstate this assistance program next year if warranted.
ADDITIONAL INFORMATION:
The State fee for Certified Disability Access Specialist Program which increased from
one dollar to four dollars annually in 2018 will remain at four dollars in 2021. This fee is
mandated by the State and is used to increase disability access and compliance with
construction-related accessibility requirements.
ALTERNATIVES:
In addition to the Staff recommendation, the following alternative action is available for
the City Council’s consideration:
1. Take other action as deemed appropriate by the City Council.
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